Tax Act introduces incentives for local manufacturing

Nigeria’s long-anticipated tax reform may redefine how manufacturers operate, invest, and plan for growth, but its success will hinge on execution, professional services firm Kreston Pedabo has said.

In an assessment of the Nigeria Tax Act 2025, Pedabo said the law signals a clear policy shift towards a more coordinated and incentive-driven fiscal environment, particularly for the manufacturing sector, which has struggled for years under regulatory complexity, high production costs, and weak infrastructure.

According to the firm, the new Act moves Nigeria away from a fragmented tax regime by merging multiple tax statutes into a single framework. While this consolidation is expected to reduce uncertainty and compliance burdens, Pedabo warned that weak administration or uneven application of the law could undermine the intended benefits.

Partner, Tax Services at Kreston Pedabo Professional Services, Kehinde Folorunsho, said the reform creates “clear opportunities for manufacturers willing to invest,” but stressed that policy design alone will not guarantee positive outcomes.

At the centre of the reform are newly introduced Economic Development Tax Incentives targeting priority sectors such as manufacturing. Under the scheme, eligible companies can obtain an Economic Development Incentive Certificate, granting a five per cent annual tax credit on qualifying capital expenditure for up to five years. Firms that reinvest profits may access longer incentive periods, while some manufacturing-related transactions are exempt from stamp duties.

Pedabo said the incentives are intended to tilt investment decisions in favour of local production and industrial expansion, particularly at a time when manufacturers are under pressure from import costs and foreign exchange volatility.

Beyond incentives, the Act revises capital allowance rules, providing clearer guidance on how manufacturers can claim deductions on plant, machinery, and industrial buildings. Folorunsho said this could ease pressure on cash flow by allowing businesses to recover capital costs more quickly during the early stages of operation or expansion.